From the outside, it might seem like Alabama is experiencing some difficult financial times. Alabama, it is time for a kitchen table conversation about your daily struggles and our state’s funding.
Imagine this scenario with me: It is Sunday afternoon. Your family just finished a leisurely lunch, and you and your wife sit down with your two children to discuss family finances. You say, “This past month has been unusually hot and the A/C has seemed to run non-stop.”
The family utility bill is $100 more than you have traditionally been charged. Thankfully, the past few months have been going well, and you have saved $100 per month for a weeklong summer camping trip at the nearby state park on the lake. You just bought your two kids some much needed summer clothes and have no extra money to pay the utility bill, except the $100 you planned to put into the vacation fund.
“But we cannot use that money! It is supposed to be for our vacation,” blurts out of your son’s mouth.
“Yeah!” your daughter chimes in, obviously upset at the idea of using fun vacation money to pay the boring power bill.
Your wife calmly says the utility bill must be paid, or the family will have no power or A/C. “How about we cut our camping trip short by a day or two and use the $100 to make sure our house stays comfortable and cool?”
“I suppose that will be ok,” the kids reluctantly admit. “But we still get five days at the lake, right?”
Friends, our state budgets are experiencing a similar scenario. (Remember, Alabama has two budgets: one for education, and a General Fund budget for nearly everything else.) We have surplus dollars for one priority, education, but not enough money for other vital governmental functions like caring for the mentally ill.
We don’t need more revenue to fund state government – we need to fix the process by which we allocate the taxpayer money we already have.
The education budget passed this week gives more annual state revenue ($5.99 billion) to education than ever before. The next closest year that state revenues approached this level was fiscal year 2008 when education was funded at $5.94 billion (plus a surplus of $471 million from one-time transfers). At the end of September 2016, there is expected to be an additional $126 million going into the education stabilization fund created by the Rolling Reserve Act of 2010. This will be the first true deposit into the stabilization fund. Previous excess amounts have been used to payback the ETF Rainy Day Account. Fiscal year 2016 is expected to bring $253 million more in excess funds that also would be deposited into the stabilization fund.
So less than eighteen months from today, on October 1, 2016 there will be an expected $379 million in a stabilization fund that we cannot use for the General Fund’s $230 million deficit. Are you seeing the similarities in my stories now?
The Governor is traveling around the state shouting from rooftops that our lights are going to be turned off if we do not raise your TAXES (by half a billion dollars) to fix the General Fund budget deficit, while in reality the state will have excess money heading into a stabilization fund. Why not use the fund instead of raising taxes?
Very often families are forced to make tough financial decisions based on limited funds or unexpected events in their lives. Our state is no different, only the current General Fund deficit was foreseeable, avoidable, and several folks like myself warned this day would come. If the state were broke and needed more of your hard earned money via taxes, I would say that, but that is not the case.
I will, however, say this: Alabama is poised to put money into a newly created (and well intended) education stabilization fund, all while you are being told the financial sky is falling and the state must have more of your hard-earned money via taxes!
My fictionalized kitchen conversation would end something like this: we have some extra money over here in an emergency fund that we had hoped to smooth things out in case of a future emergency, but unfortunately, that emergency has come.
We need to reduce our state’s savings slightly to stabilize our finances today, instead of raising taxes on you and your family. I personally had this conversation with the Governor this week.
How would your kitchen table conversation end?